Was curious if anyone could elaborate key differences between a debt fund and mREIT? For instance, Blackstone's BREDS funds vs. BMXT (it's mortgage REIT). Is this just a matter of where the capital is coming from (private investors vs. a publicly traded REIT? Thanks in advance.
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I mean, you pretty much hit the big point, REITs have to follow REIT rules for tax classification (they actually can be public or private). For most practical purposes, this comes down to how money is raised, leverage is used, and other tactical factors. I cannot say that it really changes much operationally or functionally in the type of loans they buy or originate (I sure differences exist at BX between the two, but I don't know if generalizing for all "debt funds" vs. "mREIT" would be useful).
That said, I'd guess "debt funds" would be more amenable to leveraging their portfolios to maximize returns and IRRs, more desired by that investor pool more often.
There are a few debt funds that have different buckets for example where one is a mortgage REIT and the other buckets are other sources of capital such as Life Co.
I disagree with the premise that debt funds take on higher leverage. In my experience it has actually been quite the opposite. mREITs have different regulations but better capital markets access. It is very common for mREITs to CLO deals for up to 90% leverage for example.
I guess I don't equate the off balance sheet financing via CLOs with the warehouse lines and direct leverage that debt funds seem to use so often. Either way, I would probably not want to over generalize, especially in the debt fund world.
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